October 13, 2023
The Government of Jamaica is working with international financial institutions and donors to strengthen cooperation, crowd-in private investment and build climate resilience following the Resilience and Sustainability Facility arrangement with the International Monetary Fund
The Government of Jamaica together with Inter-American Development Bank (IDB), Green Climate Fund (GCF), the United Kingdom, and the European Investment Bank (EIB) as part of Team Europe [1] today announced a collaborative approach to support a package aimed at enhancing the nation’s ability to mitigate and adapt to the effects of climate change.
This support takes place in the context of the US$764 million Resilience and Sustainability Facility (RSF) arrangement approved by the International Monetary Fund (IMF)’s Executive Board in March 2023. The RSF arrangement supports reforms to strengthen Jamaica’s physical and fiscal resilience to climate change, advance decarbonization of the economy, and manage transition risks. Reforms include the adoption of a disaster risk financing policy, the addition of climate requirements to the framework for public-private partnerships (PPPs), reforms of the fiscal framework, and incentives for investments in renewables and the greening of the financial system, aimed towards fostering investor confidence and catalyzing private climate financing.
These institutions, donors, as also the World Bank, have been providing financial and technical support to support Jamaica’s efforts to enhance its climate resilience.
A three-pronged approach
…a project preparation facility (PPF) to develop a pipeline of resilient climate-smart PPPs…
A PPF will be crucial to help generate a robust pipeline of bankable projects required to scale up private investments across Jamaica, while reducing the financing burden on the public sector. It starts with identifying systemic climate risks and ‘climate hotspots’ including through the Jamaica Systemic Risk Assessment Tool (J-SRAT), which was prepared with the help of Oxford University with financing from the UK.
The IDB has been working with the Government of Jamaica to develop a PPF focused on PPPs, to help identify, prioritize, structure, and implement resilient and climate-smart projects across sectors. Both the Government of Jamaica (GOJ) and IDB have already committed resources to establish the PPF, and as requested by the Government, discussions are underway with other development partners to scale up this initiative in the future.
In addition, the GCF will support for the preparation of innovative, and transformational investment projects. The GCF will explore the potential for de-risking mechanisms to lower financial cost and optimize the mobilization of private sector resources. Facilitating private sector participation, for example through PPPs, will significantly increase the funds available for projects that would be feasible with only public-sector resources.
…a new Jamaica Green Financing Facility…
To support the identification and financing of climate projects, the GOJ, the GCF and the EIB are taking the lead in developing a new Jamaica Green Facility, domiciled in Jamaica. The GCF will provide credit and capacity development to finance local climate projects directly or through local financial institutions. Climate-smart agriculture, energy efficiency, water resource management, sustainable transport, among other investments, can be supported.
Once established, it will pave the way for Jamaica’s other bilateral and multilateral financing partners to support the Facilitythrough additional funding, technical support, and capitalization, therefore, providing a platform where the Government and development partners can pool their resources to provide programmatic support to projects that are in line with Jamaica’s climate ambitions. In this way, this facility will trial a country-led approach to simplifying and scaling-up international climate finance provisions in line with recommendations of the Taskforce on Access to Climate Finance and additionally mobilize the £7m of financing to be made available by the UK through this initiative.
… more resilient infrastructure through low-cost, long-term, loan instruments
Low-cost and long-term financing instruments from the EIB will support the Government investment in resilient water and waste treatment infrastructure, flood and coastal protection or other sectors vulnerable to climate risks. Maturities of up to 30 years with a 10-year grace period can be considered, as well as a package that includes capacity-building and non-reimbursable grants at concessional rates to improve investment affordability.
The EIB, as part of Team Europe, has made available US$18 million of grants from the European Union (EU) to support climate-resilient water, sanitation, and clean ocean projects across the Caribbean to back a US$165 million loan facility. Through this facility, the EIB can support high-impact sustainable investment in Jamaica with extended-tenor affordable loans. The EIB is also piloting natural disaster risk clauses for its loans to ensure vulnerable communities can recover and rebuild following a crisis.
This collaborative support will bolster Jamaica’s efforts to address the impact of climate change on vulnerable communities.
Quotes
Nigel Clarke, Minister of Finance and the Public Service of Jamaica, said “Jamaica’s development will require significant and sustained infrastructure investment that outstrips the resource capacity of the Government. We will therefore need to attract local and international private investment through structured transactions. In addition, Jamaica’s exposure to climate events makes it critical that such investments are climate smart and resilient. The costs of preparing projects, however, compete for scarce resources. In addition, accessing international climate finance for isolated investments often suffers from deficiencies of scale. For these reasons we are absolutely delighted that through close collaboration with our multilateral partners, the IMF, the IDB, the GCF and the EIB and bilateral partners, the UK and the EU, today we announce a three-prong approach, that will catalyze new and larger amounts of private finance that boosts Jamaica’s climate smart development. This includes: an innovative Project Preparation Facility, a domestic Jamaica Green Financing Facility and low-cost, long term infrastructure financing instruments. These developments represent substantial policy dividends for Jamaica accruing from our climate finance reforms which have been supported by the IMF’s Resilience and Sustainability Trust program.”
The Rt Honorable Andrew Mitchell, Minister of State in the Foreign, Commonwealth & Development Office, said, “The UK is delighted to be working with Jamaica through providing technical assistance to support increased investment in climate resilient infrastructure and as a trial country for the Taskforce on Access to Climate Finance. We recognise the dual challenge faced by Jamaica in accessing public climate finance and mobilising private finance for investment in resilience. The UK financed the Jamaica Systemic Risk Assessment Tool (J-SRAT), developed by the University of Oxford, to support identification of systemic climate risks and ‘climate hotspots’, as part of our support for the Coalition on Climate Resilient Investment. This tool will help identify and prioritise interventions to enhance climate resilience, including those that can attract private finance. In July 2023, during the inaugural Jamaica-UK Strategic Dialogue, the UK announced up to £7m to leverage increased access to climate finance as part of Jamaica’s pioneering role in the Taskforce on Access to Climate Finance. Jamaica is playing a key role in exploring an innovative, country platform led approach, to simplifying and scaling up access to climate and nature finance and sharing lessons with the most climate vulnerable countries.”
Kristalina Georgieva, Managing Director of the International Monetary Fund, said, “The IMF is committed to supporting our members’ economic and financial sector policies to meet their climate goals. Reforms supported by the Fund’s RST program built on Jamaica’s home-grown climate policies were prepared in close collaboration with the World Bank, the Inter-American Development Bank, and other international partners with the goal of catalyzing climate finance. We continue to work closely with these partners since the RST program approval to further catalyze climate finance.”
Ricardo Mourinho Félix, Vice-President of the European Investment Bank, said, “Working closely together with other multilateral development banks and international partners is essential to mobilise the investment – from both public and private sources – that is needed to meet climate goals and to direct financing to where it is needed most. This partnership and the implementation of policy reforms supported by the IMF’s Resilience and Sustainability Facility will strengthen Jamaica’s climate resilience and ability to adapt to the effects of climate change. The EIB, as the EU’s Climate Bank and a key partner in Global Gateway, is committed to accelerating sustainable low-carbon development which protects vulnerable communities and biodiversity under threat from climate change.”
Ilan Goldfajn, President, Inter-American Development Bank Group, said, “Jamaica and the IDB have a longstanding and deep-rooted development partnership. We are delighted to have been so closely involved in the development and implementation of the IMF RSF-supported program for Jamaica, that will be critical to setting the stage for a more sustainable future. We are strengthening ongoing initiatives in this area with the Government of Jamaica, and we’re happy to be launching the region’s first dedicated project preparation facility for public private partnerships. These and other related initiatives will be crucial to help catalyze new and larger volumes of private financing for resilient and climate-smart investment.”
“Mafalda Duarte, Executive Director of the Green Climate Fund, said “The GCF is committed to empowering and working with our Direct Access Entities and look forward to collaborating with the Government of Jamaica to develop the new Blue-Green Facility, a platform for crowding in additional resources from various financing partners to deliver transformative and impactful climate action in Jamaica.”